The Reserve Bank of India (RBI) announced on Thursday that Non-Banking Financial Companies (NBFCs) will be required to pay dividends to shareholders beginning in the fiscal year ending March 31, 2022.

The regulator said the conditions are specific to different categories of NBFCs, which will have to meet minimum capital adequacy ratios, net non-performing asset (NPA) ratios, and a few other criteria to be able to declare dividend to shareholders. The RBI said a non-bank financier must report a net NPA ratio of less than 6% in each of the last three years, including as at the close of the financial year for which dividend is proposed.

When assessing dividend proposals, the board of directors (BoD), according to RBI, will take into account the regulator's supervisory findings on divergence in bad loan categorization and provisioning.

It should also consider the credentials in the auditors' report on the financial accounts as well as the NBFC's long-term expansion goals. It stated that "the board shall ensure that the total dividend proposed for the financial year does not exceed the ceilings indicated in these guidelines."